Reform and dues at stake in lobbyist fight.

WASHINGTON -- The Independent Bankers Association of America rarely gets mentioned in the weekly newspaper of the American Bankers Association. But the groups are at war over the banking reform bill, and epithets are flying.

"Frontal Nudity," blared one headline about the IBAA's alleged treachery on a consumer bill. "Financial bigotry," snorted an ABA columnist in describing the IBAA's endorsement of a move to saddle big banks with new Community Reinvestment Act requirements.

Across town at IBAA headquarters, executive vice president Kenneth Guenther fumes. The Bush administration bill "is a big-bank bill" supported by the ABA, he says, and its attacks are "cheap shots" aimed at a cover-up.

"They are attacking us in the context of a remarkably ineffective Washington lobby," he adds, in a pointed reference to what he sees as the inferiority of the ABA's Capital Hill operation.

The two trade groups have never exactly been friendly. But tensions have boiled over as Congress considers the Bush administration's reform bill.

At stake is nothing less than the hearts and minds of the nation's community bankers -- not to mention their annual dues.

The two associations "have overlapping membership and there is some competition there, obviously," says Joseph Belew, president of the Consumer Bankers Association, a more specialized trade group. "But things have gotten a lot more heated -- noticeably heated -- lately."

Costs Are Reexamined

Industry consolidation is reducing the number of banks eligible for membership, and increasing attention to the bottom line is leading all institutions to reexamine their costs.

The ABA, the larger group with more than 9,000 members, has lost a number of large banks, including Bank of Boston, which recently dropped its membership to cut costs, and Bank of New England, which failed and was absorbed by Fleet/Norstar Financial Group. ABA revenues are likely to be hit especially hard by big bank mergers.

Manufacturers Hanover Trust Co. and Chemical Bank, for example, which are merging, each pay $125,000 in annual dues. That is the highest rate on the ABA scale, applying to members with $50 billion or more in assets.

When they complete the merger, the ABA's revenue from those banks will be cut in half, acknowledges Edward L. Yingling, director of government relations for the ABA.

Two Memberships Needed?

The IBAA has 6,000 members that are much smaller than the ABA's top dues payers, but it still has reason to worry. Many of its banks also belong to the ABA. As competition in the marketplace becomes increasingly intense, bankers are likely to question whether they can afford to support two trade groups.

Mr. Guenther says the IBAA's membership has held steady over the past four years. And with a new program in which banks are being allowed to try out a temporary "guest membership" in the IBAA for free, Mr. Guenther hopes to begin increasing member rolls.

And both organizations are mindful that the positions they stake out in the debate over the Bush administration bill are likely to affect member loyalties for years to come.

"We have never been in such a high-stakes game," says Mr. Guenther.

A History of Bad Blood

There has always been a certain amount of bad blood between the two groups, which may account for the sharp edge on the debate.

"We are regarded by the ABA the way Israel is regarded by the Arabs," said Mr. Guenther. The ABA, he added, would just as soon drive the IBAA out of existence.

The ABA has been on the receiving end of what it regards as unfair attacks from the IBAA. The ABA generally ignored its rival whenever possible. But recently, the ABA's leadership decided to go on the offensive.

"We have talked about it with our leadership for a long time," said the ABA's Mr. Yingling. "We decided that when they take a position detrimental to the banking industry, we would have to take them on."

Feud Over Consumerism

In particular, the ABA has taken the smaller group to task over two consumer measures. One, sponsored by Rep. Joseph Kennedy 2d, D-Mass., would have linked interstate branching authority to compliance with the Community Reinvestment Act.

That amendment passed by one vote when considered by a House Banking subcommittee, but was later pulled from the banking bill as part of a deal in which exemptions from the Community Reinvestment Act for certain banks were also dropped.

The ABA charged that the IBAA unwittingly played into the hands of the industry's enemies with its support of the Kennedy amendment, a charge Mr. Guenther dismissed as a "cheap shot."

Opinion on Strategy

The Treasury knew the bill would not pass the Democratic-controlled Congress with the CRA exemptions, he said, and would have done whatever was necessary to get the offending provisions struck from the bill.

A bigger flap occurred when the IBAA agreed with the American Association of Retired Persons to support a modified version of "basic banking" -- requirements that banks cash government checks and offer low-cost accounts to the poor.

That provoked the ABA's "Frontal nudity" editorial, a title apparently intended to suggest that the IBAA was guilty of a legislative obscenity.

"IBAA's deal isn't just bad politics," said the ABA editorial, "It's irrational. And it could cause our industry a world of problems, especially for smaller banks. For shame, IBAA."

Mr. Guenther makes no apologies for his deal with AARP, whose members, he says, are his banks' very best customers. But Mr. Guenther is outraged by what he says is the ABA's selective critiques of bank trade groups.

Other Groups Also Differ

"The cry is heard throughout the town that the IBAA is dealing with the enemies of the banking industry," he said. By contrast, two big-bank lobbies, the Association of Bank Holding Companies and the Association of Reserve City Bankers, opposed efforts to preserve deposit insurance for multiple accounts -- an issue of paramount importance to both the ABA and IBAA.

"Why didn't the ABA attack them?" Mr. Guenther asked.

Mr. Yingling concedes that the multiple-account issue is more important to most banks than either the Kennedy amendment or the basic banking proposal. But he says the ABA wasn't concerned about the big banks' positions on multiple accounts.

"The ABHC didn't actively lobby it, and we are going to win that anyhow," he said. [Graph Omitted]